Wednesday, October 19, 2016

SOCIAL SECURITY INCREASE FOR 2017

It's a good news, bad news, good news, bad news story. The first good news is that Social Security recipients will receive a Cost of Living (COLA) increase for 2017, after no increase in 2016. The bad news is that next year's 0.3-percent COLA increase is the smallest in history. This means a retired worker who currently receives the average $1,350 per month benefit will see only $4 more per month from the COLA increase.

As promised, however, there is more good news. The tiny bump in COLA benefits is an indicator of an economy in which prices aren't increasing. This low inflation means Americans' purchasing power stays relatively the same, so dollars go as far as last year.

There is some additional bad news for those working and paying into the Social Security system. The COLA increase also means an increase in the maximum limit on which wage income is subject to Social Security payroll taxes, after no increase in the taxable maximum for 2016. For 2017, the taxable maximum increases from $118,500 to $127,200. For workers subject to the taxable maximum, that $8,700 increase in taxable wage income amounts to a tax increase of $539.40. For self-employed workers who must pay both the employee and employer share, this amounts to a tax increase of $1,078.80 for 2017.

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